Stoel Rives walks away from would-be Park Avenue West office tower

Torsten Kjellstrand/The OregonianGrand plans for a gleaming new office tower in downtown Portland were overwhelmed by the realities of the recession, and TMT Development's project has remained little more than a hole in the ground.

The announcement is the latest blow for the development, which has been stalled -- leaving a gaping, block-sized hole in downtown Portland -- over a lack of financing for more than a year. The Portland Development Commission voted in May to remain in Old Town rather than sign a Park Avenue lease.

"In light of the construction delay at Park Avenue West, we have been unable to reach the necessary agreements to relocate our offices from the Standard Insurance Center to Park Avenue West," Wally Van Valkenburg, the firm's managing partner, said in a statement.

Originally proposed as a 33-story building with ground floor retail and 85 housing units, the city's design commission approved a change last August reducing the size to 26 floors and eliminating the residential units.

Nike, which reportedly has expressed interest in the retail space, could not be reached for comment Friday.

Under its existing lease, Stoel Rives will occupy the top nine floors of The Standard Insurance Center. The firm has 391 lawyers and staff in its Portland office, and 856 total.

"We are fortunate to remain in a high-quality building with a good landlord, and we look forward to continuing to serve our clients from our current location," Van Valkenburg said.

Leasing new office towers is a bit of a chicken-and-egg game.

Lenders typically want to see a building 75 percent pre-leased before they'll extend financing. Potential tenants, meanwhile, are sometimes reluctant to commit to a building that may never be built. The market has been plagued by tenants downsizing as they attempt to weather the economic storm. Businesses in the Portland area gave up more than a million square feet of space in the fourth quarter of 2009 alone.

TMT's Fox Tower, the last high rise office tower built in downtown Portland, opened in 2000.

Dave Squire, managing director for the commercial real estate company Grubb & Ellis, was not involved in the Stoel Rives deal, but he insisted downtown Portland remains an attractive place for office locations. He said Park Avenue West could still be built without complete financing being nailed down.

"It's not absolutely inconceivable that a building could be built on a speculative basis," Squire said.

"There are large tenants out looking, and the financial markets are starting to loosen up a little bit," he said.

Squire said the suburbs may have excess office capacity. But in downtown Portland, "that just isn't the case."

Over the next ten years, "it's going to be very difficult for a large tenant to find space."